The free market is one of the more bewildering concepts around. Polemicists who are in favor seem to be living on another planet from those who oppose. When the ideas are put into practice, whether they succeed or fail seems to be a total mystery.

Why did Ireland crash so badly while Hong Kong succeeded? Why is Botswana being pulled out of third world poverty under free market policies, while Russia retreated back to third world conditions for a decade after Shock Therapy?

The answer to all these questions can be traced back to landed property, and economic rent more generally. Land is necessary for all production, and even life itself. Access to land is a prerequisite for any other activity.

A land title is, at root, an arbitrary threat of violence backing up an exclusive right to natural opportunities that neither you nor I have created. If you are stranded on an island that I have claimed, and I have an enforceable right to exclude you, then you are completely at my mercy. If I decide you aren’t welcome, I can send you back into the ocean to your death.

And if I decide to let you stay, the terms by which I allow you to stay are entirely at my discretion, since your bargaining power is nothing. If I decide that I’d like you to be my slave, then your choice is slavery or death.

It wouldn’t matter whether you had a backpack full of rare jewels or not, the terms by which you can live on my island are at my whim. I can demand your backpack. I can demand your subservience. I can demand anything. An exclusive right to land can override virtually any other right you have.

This raises an important question. Under our current system, what is it which is preventing us from this same outcome?

As it stands, virtually all habitable land is owned by someone, but not everyone is a landowner. As Herber Spencer once noted, which I’ve quoted before:

“Supposing the entire habitable globe to be so enclosed, it follows that if the landowners have a valid right to its surface, all who are not landowners, have no right at all to its surface. Hence, such can exist on the earth by sufferance only. They are all trespassers.”

Serfdom is partly defined by landlessness, so why aren’t all landless people serfs?

The answer is largely because we are not living in a “perfect market” and individuals are not solely self-interested. A perfect market requires such things as perfect information, rationally self-interested actors, free entry and exit by producers and consumers, and internalization of costs. We are not living in such a world.

However, there’s good reason to suppose, in the context of exclusive land rights, the more perfect the market becomes, the closer we get to a situation of serfdom.

Communications technology generally is moving us closer to a world of perfect information, and making it harder to prevent entry and exit into markets. Perfect information allows for all manner of behaviors. One such behavior is “price discrimination.”

This means that the prices are charged based on the peculiarities of an individual’s circumstances. Student discounts are a benign example. Under a system with no free land and perfect information, one could envision that rental prices would be subject to price discrimination.

In this circumstance, what I mean by price discrimination is the financial circumstances of individuals are as meaningless as the backpack full of precious jewels on the island. People who earn more in wages, or have more in savings, would simply be charged more in rent. And if they tried to go somewhere else to get a better deal, the other rationally self-interested landlords with perfect information would do the same thing.

Luckily, landlords don’t all have perfect information, and aren’t all rationally self-interested. And the more that are not, the better that is for everyone. Because everyones’ next best alternative is improved. And it is your next best alternative that determines the rent. In my original island scenario, there are no other alternatives. But if there were alternatives, then the owner of the island can only charge the difference between the value of his land over and above the next best alternative.

And likewise, it isn’t literally true that there’s no land upon which one can live rent-free. There’s a variety of mediocre options, such as living in a WalMart parking lot, which allows free parking for RVs, or sleeping on park benches. But the more that cities crack down on this, and the more that private individuals put up “homeless spikes,” the less alternatives are available. And the alternatives of the worst-off affect the best alternatives everyone else, right up the chain. The bargaining power available to everyone is set at the bottom.

Instead of hoping for our system to have more fraying at the edges, we should instead work on fixing it on a deep structural level. Luckily, there is a way to fix it, and it has nothing to do with destroying the free market. Indeed, no market resulting in serfdom can fairly be called a free market, and only cynical rent-takers would dare to call it that.

Global Warming is a pesky problem. Like fiscal austerity measures, people say that we need to tighten our buckles and pay various taxes. I choose door 3.

I’ve often thought that the silly thing about commodity-based money is that you have to hoard it away in vaults, and it sits there doing nothing. What could be more pointless? Well, there is something we would like to sit in vaults: CO2.

That’s right, I’m proposing we use CO2 as money. Within a year, I guarantee there’d be a huge gold rush to suck that stuff right out of the sky.

How would we trade with people? Simple… dry ice. Dry ice is just the solid form of CO2. Now, I know what you’re thinking: dry ice burns your skin. But don’t worry about it, it’ll be fine. Put a little casing around it, and – presto – you’ve got coins, baby!

Now you’re thinking, but doesn’t dry ice evaporate? Why yes, yes it does. But that is good! We need some to stay in the air or the plants won’t be able to breathe. But now you’re thinking that means the money loses value over time. Maybe so, but that just means it has some built-in demurrage, so that is actually a strength!

Or you could wimp out and store it in canisters, and then put it in the Carbon Bank and then receive your CO2 certificates. You know, carbon credits. It’s the “Trade” without the “Cap.”

What could possibly go wrong? Nothing. Absolutely nothing. Hopefully this can be implemented by Monday.

Technological progress is accelerating faster than ever before. Are robots going to “take our jobs?” Do we require a Basic Income to solve this? Let’s examine some basic principles.

Wages are determined by the margin of production. What this means is that a laborer’s bargaining power in the market is determined by their next best alternative to wage labor. Typically, that alternative, where available, has been homesteading.

That was the historic difference between the “New World” and the “Old World.” The New World was a land of opportunity because it had a lot of high quality land available for the taking. Not just for elites, but for any citizen who was willing and able.

In fact, in the United States the federal government didn’t require any income taxes for the first hundred years. Government was funded largely by the sale of federal lands (as well as tariffs). The rate of growth was astounding. Like China today, the growth rates were regularly reaching 10% per year.

As the land became increasingly homesteaded and auctioned off, the margin of production was reduced. By this I mean the quality of freely available land was diminished, and this reduced the bargaining power of labor.

Land is required for all production and even life itself. Without access to it, we die. Simple as that. Yet, there is no principle of justice by which one can legitimately claim sovereignty over locations on the Earth. It can and is accomplished with the sword or the barrel of a gun, but the principles of classical liberalism provide no basis for any exclusive claims over our common inheritance of nature.

“The land is the original inheritance of mankind. The usual, and by far the best argument for its appropriation by individuals is that private ownership gives the strongest motive for making the soil yield the greatest possible produce. But this argument is only valid for leaving to the owner the full enjoyment of whatever value he adds to the land by his own exertions and expenditure.” – John Stuart Mill

With the exception of Malthus, all the classical liberals recognized that land is there for everyone. With the exception of Malthus, the classicals saw the potential for an increasing pie of wealth to be enjoyed by all. The aristocratic Malthus, by contrast, was fixated on natural limits and overpopulation.

The idea of Technological Unemployment is a Malthusian concept (via Keynes) which teaches us to focus on scarcities, even though the scarcities are entirely artificial. Malthus didn’t believe we had a right to exist on the planet. He didn’t see people in their proper role as wealth-creators, but instead as resource consumers. And if the current owners of land decided to “make room” for more, that would just mean less food to go around.

All this raises an obvious question. What happens when there is no free land? The answer is that landless laborers become entirely dependent upon landowners simply for their right to exist on the surface of the planet. You get a scenario that looks very much like a Malthusian Trap, but in fact has nothing to do with natural scarcity.

When the free land is gone, and the bargaining power that comes with it, wages tend towards subsistence. The only reason subsistence wages are paid at all is because it would be unprofitable for the landlords to let their serfs starve to death. When they’re dead they stop paying rent. Landlessness is the essence of serfdom, and although the aesthetic trappings of feudalism are gone, serfdom has never left us.

The last chapters of Henry George’s book Protection or Free Trade were devoted to this topic, especially the one titled “The Robber Who Takes All That Is Left.” Here’s an excerpt:

“Labor may be likened to a man who as he carries home his earnings is waylaid by a series of robbers. One demands this much, and another that much, but last of all stands one who demands all that is left, save just enough to enable the victim to maintain life and come forth next day to work. So long as this last robber remains, what will it benefit such a man to drive off any or all of the other robbers?” – Henry George, Protection or Free Trade

Because of this, labor is placed into an artificial race to the bottom in wages. There is always some level of wages at which it is profitable to trade capital for labor. Furthermore, even if technology somehow progressed to a stage where robots really were better at every single task than humans, it would still make sense to employ humans because of the Law of Comparative Advantage.

If you want a vision of the future, imagine a child grinding away in a sweatshop… forever. That is, unless we awaken to the realities I just described.

The secret to raising the margin of production without the chaos of land redistribution or the economic damage of income taxation is to use Land Value Taxation.

“Men did not make the earth… it is the value of the improvement only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds.” – Thomas Paine, Agrarian Justice

One way to share the fruits of that rental value of the Commons is to simply distribute it as an equal Citizen’s Dividend.

How is this different than the Basic Income? The Basic Income is not tied to any funding mechanism, and as such would almost assuredly come out of taxes on labor, sales, or other productive activities. Thus, it leaves untouched the Robber Who Takes All That Is Left.

How does giving money help a serf whose existence is utterly dependent upon a landlord? The rents are not based on cost of production… because land is not produced! The landlord will just increase the rent by however much the Basic Income is, because he has all the bargaining power. It is like trying to fill a bucket with a hole in the bottom.

We can plug up that hole by taxing the rental value of land to the fullest extent possible, and provide not just a “basic” income, but a dividend that sustainably grows over time with the progress of civilization. The value of our birthright to the Earth increases with every passing year. Why limit ourselves to just a basic income?

As anyone familiar with classical political economy knows, true property rights are rooted in self-ownership. You own yourself, and by extension you own what you make through labor or voluntary transactions thereof. Land, however, is not a fruit of labor.

One might reasonably suppose that land, being unlike other things that are called property, would have special economic characteristics. Classical economists recognized this to be the case, and spoke at length about the implications of it. Modern economists forgot this truth, and insist on lumping everything together under the solitary label of “property,” which serves to obscure these implications. They simply bicker about how best to achieve equilibrium and Pareto efficiency, given “value-free” analysis of the system that exists. Some might call that dispassionate analysis; others might call that bean-counting for elites.

Unlike the priesthood of the status quo, who have internalized its values under the false pretense of cold rationality, I am interested in making moral judgments about the system we live under.

We can eliminate taxes and debt, poverty and special privilege. Contrary to the dour pronouncements from the curators of the dismal science, we can have it all.

The Basic Properties of Land

In terms of political economy, “land” refers to access rights over everything that was here before us humans. When you buy land, what you are really buying is a bundle of rights, be they air rights, mineral rights, drilling rights, surface rights, spectrum rights, right of way, you name it. Such rights are necessary for all production, and even life itself.

Supposing the entire habitable globe to be so enclosed, it follows that if the landowners have a valid right to its surface, all who are not landowners, have no right at all to its surface. Hence, such can exist on the earth by sufferance only. They are all trespassers.

– Herbert Spencer, Social Statics

That is a simple illustration of the absurdity of the current system, when taken to its logical conclusion. Indeed, we aren’t far from that.

When land is made into a commodity, the progress of society, be it in terms of productivity, philanthropy, or the rule of law, tends to be encapsulated in land values.

…every improvement in the circumstances of the society tends either directly or indirectly to raise the real rent of land, to increase the real wealth of the landlord, his power of purchasing the labour, or the produce of the labour of other people.

– Adam Smith, Wealth of Nations

So the community as a whole is what generates all this value, and yet the windfall gains accrue only to the holders of these access rights. In fact, under feudalism land titles were the root of noble privilege, and although we have left behind the aesthetic trappings of feudalism, we have yet to be rid of the core component.

That means in practice the payments which can be demanded for these access rights are not like other sorts of payments.

Moreover, wages and interest, when there is no rent, are regulated strictly by free competition; but rent is a monopoly-charge, and hence is always “all the traffic will bear.”

– Albert Jay Nock, Henry George: Unorthodox American

Essentially, when private individuals get to levy a charge on others for the mere privilege of existing on the planet, this creates an endemic state of poverty for large masses of people. Just as land titles are the essence of noble privilege, so is landlessness the essence of serfdom.

It is through this logic that David Ricardo debunked Thomas Malthus’s “Iron Law of Wages.” He developed his own “Law of Rent” to show that when the produce obtainable on the best available rent-free land (the margin of production) is high, wages will also be high since everyone’s next best alternative to wage labor is improved.

When Malthus and Ricardo were debating, the Old World was all built up and many people were living in Dickensian squalor. Yet, the New World of America had lots of free land, and it witnessed growth rates comparable to those of China today. Unemployment wasn’t even part of the vocabulary. True, many homesteaders did not have an easy life, but everyone who was willing and able to work could simply go work. Why is that no longer possible?

Why Have Titles?

If we all have a right to access the Earth, then a reasonable question might be to ask, “Why do we have land titles at all?”

One proposal, called Occupancy and Use, advocates that people only be able to claim possession of that which they are currently using. This, in theory, could enable everyone to have some access rights over the Earth. Not equal rights. Some would be able to claim the best land, while everyone else is relegated to worse land. Yet, even if this were acceptable, problems abound.

“The mere abolition of rent would not remove injustice, since it would confer a capricious advantage upon the occupiers of the best sites and the most fertile land.”

– Bertrand Russell, Why Men Fight

Usually this view is coupled with the idea that renting out land is immoral. The problem, however, is that there is no effective way to know whether someone is renting land or not without a very intrusive government. And even if that were acceptable, the entire concept is arbitrary. There is no objective standard by which to judge when a parcel has been abandoned. There is no objective standard by which to tell how much land someone is using, or how big a yard should be. How would joint enterprises work? It becomes dreadfully confusing to imagine how anyone would feel comfortable starting a business under conditions where land can just be considered unused for arbitrary reasons.

The reason land titles are appropriate is that exclusive land titles provide stable and well-defined rights by which individuals and organizations can plan around. They do not have to wonder whether it is legal to build in a certain spot.

The logic of well-defined rights, however, does not trump all other considerations.

“The land is the original inheritance of mankind. The usual, and by far the best argument for its appropriation by individuals is that private ownership gives the strongest motive for making the soil yield the greatest possible produce. But this argument is only valid for leaving to the owner the full enjoyment of whatever value he adds to the land by his own exertions and expenditure.”

– John Stuart Mill

Locke tried to compensate for this shortcoming of land titles by suggesting what became known as the Lockean Proviso. He claimed that appropriation of land could only occur “…at least where there is enough, and as good, left in common for others.” The problem, however, is that it is an impossible standard.

There is no objective basis upon which one could claim how much is enough or whether one parcel is as good as another. It also glosses over the fact that virtually all land currently under private ownership can be traced back to conquest. Even if such conquest had never happened, presumably, under this policy, early homesteaders could claim large swaths of land, and latecomers might be left with little, and these heritable land titles would quickly create a system like that described by Herbert Spencer, where many would find themselves without any rights at all to land.

The Remedy

The commodification of land itself is not the issue. Indeed, it makes great sense to have a well-defined system of access rights. The issue is who gets the benefits of the access rights. Anything less than an equal share is a violation of the Law of Equal Liberty, for any exclusive claim over natural opportunities necessarily reduces the opportunities available for everyone else. There is only one way to ensure equality of opportunity: for the community to recapture the value of land.

It is for these reasons that virtually all the notable classical liberal political economists supported the idea of the community recapturing the land values, using the discourse of taxation.

A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.

– Adam Smith, Wealth of Nations

A tax on rent would affect rent only; it would fall wholly on landlords, and could not be shifted to any class of consumers. The landlord could not raise his rent, because he would leave unaltered the difference between the produce obtained from the least productive land in cultivation, and that obtained from land of every quality.

– David Ricardo, On the Principles of Political Economy and Taxation

When you impose costs on man-made objects, you see a reduction in supply. The supply of land, on the other hand, is fixed.

Instead of hampering production, it would boost it. Think of every vacant lot or surface level parking lot in a city, every abandoned building, every single-story fast food franchise amidst skyscrapers. Those are all examples of the waste and underdevelopment of the current system. These things occur simply because it is cheaper to sit on the land and hope others put in the work necessary to make it valuable, compared to the expense of undertaking a risky entrepreneurial venture.

Taxes? What Taxes? We Don’t Need No Stinking Taxes!

Landholding ought not be seen as a no-strings-attached sovereignty. A true libertarian position recognizes that landholding comes with obligations: obligations to internalize negative externalities, and obligations to respect the Law of Equal Liberty. Sure both of those things may be difficult to do, and may not be accomplished perfectly, yet we must try to achieve them one way or another.

My goal is not to say exactly how the land value should be recaptured. Whether this is done by a municipality, a nation-state, or a Charter City is not the topic of this paper. I only aim to spread a general recognition that it is an essential prerequisite for a just and sustainable socioeconomic order.

Value Capture is most commonly advocated as “Land Value Taxation.” However, it is a tax only in the sense that Pigovian “Taxes” are. It is not a tax on production, and thus there is nothing objectionable about it from the perspective of classical liberalism. Indeed, I’d argue that without it, classical liberalism is a cruel joke. Value capture is simply a reconceptualization of who owns the value of the access rights over the Earth.

Rent is not a tax. It is payment for the use of a location, determined by the higgling and haggling of the market, and it makes no difference to the land user whether he pays rent to the city fathers or to a private owner.

– Frank Chodorov, Out of Step

Under the current system, rent is like an extractive force upon laborers and capitalists, and that can only be fixed by preventing the private appropriation of land rent. I care not whether the person pocketing the rent is an ideal Lockean homesteader or Donald Trump, it is unjust either way, just as it would be unjust for either of them to unaccountably create negative externalities.

Given that the value of the Earth belongs to us all, justice demands that the land value must be recaptured to the fullest extent possible, not simply as a means for funding essential services. If the government is limited enough and well-managed enough to not require all of the land rent, it should still recapture all of it and distribute the surplus as a flat Citizen’s Dividend, since that value truly does belong equally to all. This dividend would not only be essential for justice, but would provide a strong incentive for all parties to keep public services lean and efficient.

That which makes public services more efficient would be of direct interest to citizens. That which makes land values higher, would be of direct interest to bureaucrats, which means their incentive would be to create value for the community, rather than to take from productive activity. The incentives between individuals and their community are aligned.

Steady Growth.

The ideal of steady growth is completely feasible. Monetary policy is not the root cause of the business cycle. Borrowing fuels speculation, but it isn’t the ability to borrow which creates the business cycle. That merely amplifies it. You have to ask why they are borrowing. If the borrowing were for normal productive purposes, the borrowing wouldn’t be inflationary.

No, the root cause of the cycles isn’t borrowing, it’s when we leave for the taking a giant pile of community-generated wealth. We shouldn’t find it unusual that people should want to pocket unearned wealth. Or even that they should want to undertake bouts of debt-fueled speculation. “Safe” unearned income sure beats working. Who wouldn’t want that? It is the system which is corrupt.

Land shouldn’t be seen as this “safe” investment, which grows over time with the progress of civilization. No other asset works like that. It ought not even be seen as an investment; if anything, it should be seen as a liability. That we have obligations when we take on the duty of landholding might come as a shock to some, but it is the only position consistent with liberty, and key to our success.

Though it isn’t calculated in official statistics like the CPI, rent is what drives much of the increase in living expenses, and why the working classes often never see a piece of their increased productivity during booms. What good is it that the GDP has risen if the general level of wages do not rise as well? That is not the sort of steady growth I’m interested in.

Unemployment during busts is a result of the market correcting for the inflated cost of production resulting from land speculation and other rent-taking. Remember, land is necessary for all production, and life itself. I don’t care if your business is all Internet-based, you and your employees still require access rights to the Earth, as do all the producers of the capital goods you consume. Conversely, if people have access to land, there can be no unemployment.

Really Smart Growth

Another cruel joke of the current system is the notion of Smart Growth. We cannot possibly curb sprawl as long as land speculation occurs. Let’s say a really nice community is developing. Businesses are sprouting up. This increases the land values. Before you know it, the land values exceed the ability for many people to pay. Even though the transportation infrastructure isn’t anywhere near capacity, and density living is far more ecologically efficient, people begin to go elsewhere in search of a place to live. It is simply too expensive in town.

They buy up land outside of town. Yet, before you know it, the new settlement is getting built up, the community is generating lots of value, and they begin construction on new infrastructure, and again before you know it the land values exceed the ability for people to pay. How could anyone believe that people would make different decisions simply because a few do-gooders built pedestrian friendly development? It is absurd to believe this process of sprawl can be halted through zoning, light rail projects, philanthropy, or any sort of central planning. It can only be halted through systemic change.

Land is artificially scarce under the current system of land tenure. We’ve already discussed the issue of vacant lots, abandoned buildings, and underdevelopment. Those are just the most visible signs. What about the things we don’t see?

For instance, think about our industrialized agriculture system. It is probably the most land-intensive production there is. Wasteful production practices are essentially subsidized by this system. Why aren’t we moving towards more high-tech and efficient forms of production? You may have heard about the concept of vertical farming. People often ask why it isn’t common practice, and the answer given is that it is “not economically viable.” A primary reason why it isn’t viable is that holding lots of land is under our system is very cheap, and even profitable.

This insanity isn’t just contained domestically either. All the waste of the current system creates this compulsion to expand abroad, to continue fueling the land speculation Ponzi schemes. This creates international resource conflicts, and may even trigger war. It is no wonder that the Old World, where all the land was parceled out and the Commons long-enclosed, became the aggressors in the Scramble for Africa. Of course, eventually they gobbled up all of Africa, and finally turned inward on themselves in the form of the First World War.

What does this mean in practical terms?

You don’t have to be a political economist to see the common sense truth of the matter. Some people just care about practical or personal concerns, and value capture is just as relevant from this perspective. Through it we can replace income taxation with a straightforward, efficient, and non-invasive revenue source.

It doesn’t require teams of IRS auditors to snoop into every transaction you’ve ever made. You can’t hide your land in a Costa Rican bank account. The current “property tax” system in the United States isn’t even that different from a methodological perspective; it would only need to change in two ways. It would need to stop including improvements as part of the taxable value of real estate, and it must raise the rates up to near the full annual rental value of the location.

The one thing basically all economists agree on is that “incentives matter.” The shift in incentives under value capture would cause dramatic and positive changes in the relationship between citizens and their community.

Well, then, since natural, resource values are purely social in their origin, created by the community, should not rent go to the community rather than to the Individual? Why tax industry and enterprise at all–why not just charge rent

– Albert Jay Nock, Henry George: Unorthodox American

Our current system has very perverse incentives. Want to go build a restaurant? Pay up. Want to buy up a prime location and hold it out of production? We’ve done everything in our power to make sure you get to keep the full value of your precious title. Want to build a community center to help the poor? Congratulations, you’ve just raised the rents for all the landless people in the area, and may have just “helped” them right out of a home.

As a landless person you have essentially no stake in your community. I walked through a poor neighborhood once and was shocked to find a big pile of garbage sitting out in the open in a vacant lot. I then saw one of the local residents walk by and chuck yet more garbage into it. I was puzzled by why anyone would do such a thing, but it makes perfect sense now. Even caring for the cleanliness of one’s community is of little benefit to the landless. Cleanliness raises rents, and littering lowers them.

You can see the same thing with the contentious issue of gentrification. Have you ever wondered why gentrification is so despised? Why should people hate that their community is improving? They should be rejoicing! Right?

Well, they would be under any sensible economic arrangement, but now it merely causes displacement and hardship. Wouldn’t it be great if improving the community actually… you know… improved the community. What a thought!

Inequality

I do not claim that George’s remedy is a panacea that will cure by itself all our ailments. But I do claim that we cannot get rid of our basic troubles without it.”

– John Dewey, Steps to Economic Recovery

Given the fundamental nature of land, and access rights over it, unless the land question is taken into account, one of the primary consequences of any otherwise-positive economic reform, including the repeal of other special privileges, will be an increase in rent to landlords.

What has destroyed every previous civilization has been the tendency to the unequal distribution of wealth and power.

– Henry George, Progress and Poverty

Inequality is dangerous to liberty, and can enable vicious feedback loops of rent-seeking, which sets the stage for corporatism on one hand and state socialist counter-reactions on the other. Vast fortunes should not be worshipped by those who love liberty. They should be looked at skeptically, and seen as a red flag that something is amiss. Most great fortunes are not the result of voluntary interactions in the market, but by direct or indirect state intervention on behalf of the powerful. The mother of all those privileges is land speculation.

It’s time we heed the actual words of the classical liberals, so that we may create a system that works for everyone. No more compromises between prosperity and equality, freedom and justice. We can have it all.

The pundits and journalists will tell you that there are no simple remedies to our problems, with an air of authority reserved only for those serious few with the courage to offer up this sober dose of “reality.” Besides, even if there were a simple solution, we can’t agree on the most basic of things anyways, since we are so “polarized,” or so the narrative goes.

So instead of actually solving problems, the best we can hope for is a series of convoluted band-aid solutions to fix whatever crisis is at hand.

Is unemployment soaring? Let’s produce a pathetic stimulus package that mixes the worst of both Keynesian and supply-side ideology.

Plagued by deficits? Let’s spend all our political energies on bickering about whether the top tax bracket should be 35% or 39.6%.

Of course we mustn’t forget to provide generous amounts of corporatism to the already-privileged.

So if the climate is in crisis, let’s give tradable pollution licenses based on how much one has been polluting historically, and give it a cute name like Cap and Trade.

And if prices in our cartelized healthcare sector are skyrocketing, just force everyone to buy private health insurance and label that “progressive.”

Everyone seems to agree there is something seriously wrong with the modern American political discourse. Some blame the Left, some blame the Right, and a fair number are now blaming the Center. There is plenty of blame to go around, and I would contend that we have a failure of critical thinking on the part of our intellectuals of all stripes.

It is undoubtedly the case that our establishment intellectuals are not chosen on the basis of their merit, but mostly on their compatibility with the interests of the privileged classes. Yet, I’m not just blaming the establishment figures; I’m blaming all politically-minded citizens who buy into their oh-so serious arguments and false political divisions.

What if I told you there was a solution which transcends political divisions? Which is consistent with the ideals of our Founding Fathers? Which can be implemented anywhere on the local, state, or federal level? Which can increase our overall prosperity, reduce inequality, promote peace, and improve the environment all at the same time? Which can do all this without any major restructuring of our institutions?

Assuming such a remedy even exists, surely it would be controversial, right? Something which all the various political ideologies could never agree on? Well the remedy does exist, and it has been supported by principled people of nearly every political persuasion, including some of the greatest minds in history.

The answer has nothing to do with techno-utopianism, monetary reform, deficit spending, austerity, or any of the other ideological cul-de-sacs commonly promoted.

Remedy you say? That’s preposterous!

It goes by the unassuming moniker of the Land Value Tax (LVT), which was most famously promoted by the American political economist Henry George. It is based on the notion that people ought to own what they produce, but since land is not a fruit of labor, private land ownership has no basis in natural rights and is thus the ideal source of government revenue. The Land Value Tax preserves the land title system, but simply makes it expensive to hoard land in unproductive ways.

Unlike common property taxes, the LVT does not count improvements to the land, such as buildings. Buildings are man-made, but land isn’t. When you tax buildings, you discourage people from building. Yet, when you tax land, the amount of land doesn’t decrease. The supply is fixed.

By untaxing labor and shifting as much taxation as possible onto land values, we enhance the incentives for production as desired by fiscal conservatives. Yet, it provides a huge source of natural and community-generated wealth to tap into, which is the ideal funding mechanism for virtually any infrastructure project or social program desired by those on the Left.

Those of a more “geo-libertarian” bent would prefer that revenue be distributed as a Citizen’s Dividend, rather than used to fund bureaucracy. Yet, if the funding of bureaucracy is to come from somewhere, they would strongly prefer it come from land values. Milton Friedman called it the “least bad tax” for this reason, but really it is far more profound than that.

The LVT strikes at the heart of the land monopoly. In a powerful speech, Winston Churchill said, “Land monopoly is not the only monopoly, but it is by far the greatest of monopolies — it is a perpetual monopoly, and it is the mother of all other forms of monopoly.” It is the essence of feudalism and for all of our supposed social progress we’ve yet to be free from it. Unless and until the land monopoly is destroyed, the positive effects of virtually all economic reforms are largely nullified.

Monopoly in the Park | Anna Fox

Profits that are not a return to labor or capital are called economic rents, and are usually unearned incomes attributable to restricted access rights. One of the primary sources of rent is monopolization, and one of the greatest tools for achieving monopolization is actually government intervention on behalf of the monopolists. Historically, every major monopoly has been the beneficiary of enormous state-granted privilege. Whether it’s AT&T, Microsoft, or Standard Oil, the root of their power can invariably be traced to particular political privileges.

Taxing such privilege causes no disincentive for production because rents have nothing to do with production, they are a result of imbalances in power and imperfections in the market. Land, and the fruits of nature generally, are necessary for all production and even life itself. Therefore, when access to it is concentrated into the hands of a few, the rest have essentially no bargaining power.

Who Owns the Earth?

Photo by Kurt Elmelund

If all land on Earth is owned by a subset of the population, then the landless attain a status akin to that of trespassers on the Earth. If – as our moral instincts inform us – we all have a birthright to access the Earth, then this realization must be reflected in our political institutions. A Land Value Tax system recognizes that land titles are a practical way of allocating land use rights, but that the proceeds from such monopolization over locations on the Earth must be returned to their rightful owners, the community as a whole.

Really it isn’t a tax at all, in the usual sense of confiscating that which one produces. On the contrary, by allowing eternal sovereignties over our common inheritance without any repayment to society, one has essentially granted a subsidy to the landlords. Whenever anyone in the community does anything to improve the region, the land values rise. This occurs no matter what the intentions were. If a do-gooder builds a community center in an impoverished area, the land values and rents increase. Instead of helping the poor tenants in the region, the do-gooder may have just helped them right out of a home. Whilst the landlord could have been sleeping through the whole thing, and in the end see his land values rise.

Invent something to improve harvests? Excellent, more rent for the landlords and the exact same wages for labor. The same story could be said of welfare programs, basic income guarantees, and the like. If activists fight hard and turn the region into a bastion of civil liberty which attracts people from all around, it doesn’t matter if the landlords were sleeping or actively opposing the activists, they will see their land values rise, and the tenants will see their rents go up. The same is true again of government infrastructure projects, and anything else which makes a region attractive.

Back when I was a run-of-the-mill progressive, I would often echo progressive sentiments about how awful it is that people are forced into dangerous and low-wage jobs. This would provoke respectful but spirited debates with those who call themselves “libertarians.” They would say that nobody is forcing them to work. They were voluntarily agreeing to work.

Such debates were common around the Enlightenment. Thomas Malthus reacted to the Enlightenment notions about freedom leading to a golden age of prosperity. He claimed that natural resource scarcities and breeding patterns inevitably cause markets to reduce wages down to subsistence. He called this the Iron Law of Wages. He was certainly correct that something about the market system of his day (and our day), tends to drive wages down to a bare minimum. Yet, his emphasis on natural scarcities and overpopulation was unfounded.

David Ricardo responded forcefully to Malthus, and argued that actually the trends being witnessed were the result of what became known as the Law of Rent. Ricardo’s analysis of rent proved that once all freely available land is claimed, then as production increases, rent will eat up virtually all of the increase in production. This explains why all of the amazing technological improvements of the day were doing nothing to improve the conditions for the large masses of landless paupers.

This is why technology alone can’t save us; we need systemic reform. If you’re aware of the problems in the biotech industry regarding the patenting of life, you should recognize that is very much like another form of land monopoly, as it creates private sovereignties over the fruits of nature which should belong to all. Yet, biotech also increases the rent of real estate simply by improving crop yields or indeed whenever it does anything of value at all.

Same with any other advanced technology. We can’t rely on the super-rich to build us all nano-fabricated housing projects out of the goodness of their hearts, we need to reign in the privilege bestowed by the state upon private entities. I’m confident that the day they figure out how to upload minds into computers, they’ll still find a way to make you pay rent.

Ideology doesn’t matter, we’re in this together

While not everyone bases their political views on principles, I am confident that most do. In the case of LVT, it isn’t Right vs Left, but the principled vs the corrupt. Any serious political view, short of misanthropy, has every reason to support it.

– If you are an environmentalist, you should support Land Value Taxation in order to spark more efficient use of land. We’d still require all the usual mechanisms to internalize externalities, but the LVT alone would encourage all the more sensible agricultural practices promoted by environmentalists, such as permaculture and vertical farming. Industrial monoculture and factory farming is highly land-intensive. If holding land becomes expensive, then the markets would more accurately reflect the social costs of such massive landholding.

– If you are a humanitarian, you should support Land Value Taxation primarily because until the land monopoly has been defeated, no amount of philanthropy can possibly stop the trend of wages tending towards subsistence.

– If you are a serious technocrat, you should support LVT in order to reduce unemployment, increase wages, and promote peace. On a local scale there is evidence of all of this, including reduced crime rates. I have no doubt that if countries follow this model, we will see many former enemies become prosperous interdependent trading partners.

– If you believe in natural rights, you should support Land Value Taxation in order to end the confiscation of honest income and interest, and return that which belongs in the commons. The concept of the LVT really has its roots in the writings of people like Adam Smith, Thomas Paine, and others who passionately believed that labor is the sovereign property of the individual, but that the Earth is our common inheritance.

“Men did not make the earth… it is the value of the improvement only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds.” – Thomas Paine

Especially you, Progressives

It hardly seems possible that a concept which was supported by many of the original free market capitalist ideologues could be a progressive one. Yet, if you are a progressive, you absolutely should support Land Value Taxation, not as a small footnote of a larger platform, but as a central tenet.

The ideas of Henry George and the Single Tax Movement were one of the original inspirations of the Progressive Movement in the early 20th Century. Progressives like John Dewey were awestruck by the power of the arguments of Henry George in his masterpiece Progress and Poverty.

Of Henry George, Dewey wrote, “No man, no graduate of a higher educational institution, has a right to regard himself as an educated man in social thought unless he has some first-hand acquaintance with the theoretical contribution of this great American thinker.” To this day, some of the most principled progressives like Dennis Kucinich and Ralph Nader have drawn inspiration from him.

When you look at any vast fortune, you will virtually always find the heavy hand of government as part of the essential underpinning. Whether it is through regulatory capture, patents, state-sponsored licensing cartels, corporate personhood, or any other sort of government-granted privilege. Yet, as long as the mother of all monopolies remains, it would make no difference how many of those other privileges were struck down. The land monopoly would absorb all of the difference that the elimination of privilege might otherwise have made.

It is true that even under our land monopoly there are a small subset of progressive reforms that improve conditions of the lower classes, though often in an imprecise or inefficient manner. Yet, the only way one can even know what those are is though an understanding of the land monopoly. The reforms I am speaking of are very much like the previously mentioned artificial scarcities which favor big business. I am speaking of artificial labor scarcities.

The Fair Labor Standards Act of 1938 is a perfect example of this. By banning child labor and establishing the Eight Hour Day via overtime legislation, the FLSA restricted the supply of labor, increased leisure, and reduced the number of unemployed. Most think of it as the law which established the first federal minimum wage, but actually that was more like an afterthought meant to encourage automation in light of the artificial labor scarcity. The post-war economic boom and creation of the middle class was a result of such labor scarcities.

Unfortunately it is difficult to enforce overtime laws, and nowadays businesses have become so proficient at evading this regulation that it is practically non-existent for most. As with the income tax, overtime laws are not that difficult for people to evade. Even if it were a good idea, the government simply can’t be very efficient at sticking its nose into every business deal.

Land, however, cannot be hidden. It would therefore be much harder for individuals to evade. Thus, compared to many other economic reforms, it is fair, efficient, and straightforward. Our current system of real estate assessment would not even need to change drastically, and it could obsolete certain agencies like the IRS.

Income taxes cannot be truly progressive, by their nature, no matter what sorts of brackets are in place. Taxing income does not change the fundamental market power of individuals, and as such the burden of taxes are just passed around until the income distribution reflects market power. Again, it wasn’t income taxes that created the modicum of equality after WW2, it was merely labor scarcities, and those can only do so much.

Additionally, we are suffering under the volatility of speculative land bubbles, like the recent mortgage crisis, which are a byproduct of the land monopoly. Land is necessary for all economic activity, and when land is inflated in price, everything else tends to become inflated as well. Yet, it is still shocking how much of the bubble was directly tied to land.

When diagnosing the crisis, people like to point to all sorts of things such as derivatives, credit default swaps, collateralized mortgage obligations, and so on, yet they ignore that a huge portion off stuff was based on mortgages, i.e. the ability to speculate on land. The LVT would change all that in a truly progressive manner, and end the volatile land bubbles. It would reshuffle market power in favor of productive activity and away from unproductive hoarding of land. Most importantly, it would allow us to actually benefit from other sorts of reforms, and as such must be the top priority. Until then we’re merely reshuffling deckchairs on the Titanic.

Bring on The Remedy

Image by Nick Kenrick

There is hope. The hope lies not in austerity, monetary policy, deficit spending, or even technology. That last one was a hard pill I had to swallow, but the sooner we all accept that the better.

The beauty of this simple reform is almost surreal. It solves so much, yet asks so little. Instead of increasing bureaucracy, it would reduce it. Instead of weakening incentives for production, it would actually create them. Instead of encouraging waste and urban sprawl, it would promote efficient use of land.

The LVT has been experimented with in many times and places, and it has always succeeded to the extent that it was tried. It holds the potential for uniting principled minds of every persuasion, if only we can break free of the ignorance espoused by the talking heads who tell us that the only remedies available are painful and complex.

Let’s show those bastards that they’re wrong. A better way is possible, and through it we can finally reach that golden age we’re always dreaming of.

I haven’t found much cogent criticism of Henry George, and I’m always open to reading any serious critiques. In the discussion page of the wikipedia article on Georgism there was a link to a mutualist critique located within W. H. Van Ornum’s book “Why Government at All?”

The focus of this blog post will be Chapter 2. If there are any other parts which you, my dear reader, find in need of a retort, I will kindly oblige.

[George] defines interest as “all return paid for the use of capital, including compensation for risk.” But capital being a part of wealth is necessarily subject to the laws which govern wealth. Yet wealth is extremely perishable. From the time of its production it begins immediately to decay. Some forms of it will decay in a few days; some in a few weeks; and comparatively little will endure for a term of years. Now it is ridiculous to claim that it is still used after it has ceased to exist. But does interest cease when the capital, for the use of which it is paid, has perished? Not a bit of it! It remains a perpetual tax upon labor until the original amount of capital, undiminished by waste, has been restored.

By the definition of political economy, interest is simply the return from capital, regardless of the payment schedule. If it is all paid in a lump sum, then one doesn’t have to factor in the time value of money, but if the payment schedule to the producer is longer, then you are simply doing the same thing as paying in a lump sum but as if you had taken out a loan from the producer to pay it.

Mr. George says: “That I, having a thousand dollars, can certainly let it out at interest, does not arise from the fact that there are others, not having a thousand dollars, who will gladly pay me for the use of it, if they can get it no other way; but from the fact that the capital which my thousand dollars represents has the power of yielding an increase to whoever has it, even though he be a millionaire.” Suppose then, a miser has the thousand dollars, and hoards it, how much increase will it yield him? Or even if invested in those forms which Mr. George assumes will yield a natural increase, such as orchards and vine yards, or herds and flocks, how will he utilize that increase without labor? Admitting the necessity [26] for labor in such cases, he still holds that “there is a distinguishing force co-operating with that of labor, which makes it impossible to measure the result solely by the amount of labor expended.” And so too, in precisely the same way, and to the same extent, when the mechanic utilizes the power of the steam, the waterfall, or of electricity to aid him in his work is “there a distinguishing force co-operating with that of labor, which makes it impossible to measure the result solely by the amount of labor expended.” Where does the product of this “distinguishing force” go to?

Everything is a part of nature, including humans, but it is access rights which we must be concerned with, not the question of whether something is natural. If we ask, “is this natural” to any phenomenon, the answer will virtually always be yes. Human labor directs the power of nature in ways useful to humans, and what George is asking is why one human is allowed to direct that power and another not allowed.

If all of the economic rent of a given location is paid out, then all of the forces of nature in addition to the community-generated wealth of the region would be factored in, and all production would have the rent fully accounted for… and as Ricardo showed, that recapture of the rent could not be “passed on to other classes of consumers.”

Some define all taxation as theft, so terminology becomes the issue here. One can only be stolen from, in any meaningful sense, if one has just claim over the possession in question. The recapture of rent is often misleadingly labelled as a “tax” in the same way that internalization of externalities is often misleadingly labeled as a “tax.” It is really more like restitution than taxation. Just as externalities could be internalized in any number of ways, so could rent be re-captured. Fred Foldvary put forth a model of geo-anarchism that does so via means not unfamiliar to mutualists.

I think that even Mr. George will not deny that it rightfully constitutes a part of the rewards of labor. If this is true in the case of electricity it is true in that of interest. If not, why not? Again, if interest represents the average natural increase due to the reproductive forces of nature distinguishable from labor, why does it constantly fall? Is this distinguishing force less and less active? If so, may it not ultimately stop altogether? Interest would then abolish itself.

George explains why interest constantly seems to be falling under our current political-economic paradigm in the chapter titled The Law of Interest. The reason for this apparent contradiction (which is a theme he returns to often… why progress and poverty seem to go hand in hand) is that rent is eating up such a large share of total production, and that share actually increases as we see gains in efficiency, as per Ricardo’s Law of Rent.

What is left over after rent takes its slice is Wages and Interest, and, ceteris paribus, they tend to approximate one another since if wages are higher than interest we will tend to see an increase in the number of people choosing labor over entrepreneurship… which really gets at another fundamental point of George which is that capital is merely stored-up labor and there really are only two fundamental factors of production… nature and human creativity.

No! The real truth is that one of the appliances, which have been devised to facilitate the exchange of wealth is money; and monopoly has seized upon that just as it has upon everything else which it can control, and by limiting the amount has been able to extort a price for its use. It differs in no respect from taxes and tariffs, or rents and royalties levied upon the production and exchange of wealth, for the benefit of those who do not labor.

It seems to be the idea of loans which mutualists object to, yet the need for loans is not a result of the Money Monopoly or any such thing, it is a result of the time value of money, differing needs and wants, and differences in the distribution of capital.

There is such a thing as seigniorage, which is a means of “extoring a price” for the use of money, though it is a rather trivial issue today. It is properly classified as economic rent, and as such could be subject to georgist taxation, but there are bigger fish to fry.

Suppose now, I want a watch. The materials for its construction are in the earth. They are component parts of the land,—several bits of land. Labor is applied, and those bits of land are changed into several kinds of pig metal. But the only real change is that the labor has been impressed upon those bits of land. They have taken on the concrete form of pig metal, but they remain simply land plus labor. Exclude the land, and the labor, and nothing remains. Take another step toward the production of the watch, and we have but repeated the first; and when we have finished the watch, it is still only land plus labor. Exclude these two, and nothing remains; therefore, according to Mr. George’s own formula, capital is nothing. Apply the same process to any other form of wealth, and the result is precisely the same. Capital has not been a factor in its production, and is not entitled to share in the proceeds.

George would not say capital is not a factor at all, but that it is more or less a sub-factor. It is human creativity in a stored-up form. It can get tricky considering how many capitalists are simply rentiers in disguise since they lobby for protective tariffs, barriers to entry, patents, and so on… but if we speak of production by capitalists without special privileges, we don’t have to be very concerned, because as was mentioned previously:

Interest falls because the number of capitalists, and the aggregate amount of capital seeking borrowers, increases faster than the borrowers do. The competition brings down the price.

Ornum continues:

There is a circulation of wealth, and if that circulation is free, the distribution will remain unchanged, because the producer will insist upon getting an equivalent before he will part with it. The thing that does take place is a concentration; and it begins at the moment when the product passes from the hands of the laborer to the employer. The laborer is not free. He has been compelled to enter into a contract of employment by which he must give up his product for a stipulated price, which is inadequate. The concentration begins there. The circulation is not free. The inequalities here set up are further increased by every law or regulation which interferes with the freedom of that circulation. Is this too nice a distinction? I think not. To speak of the distribution [29] of wealth, when we mean a concentration, is to lay the foundation for serious errors. From this come all the arbitrary schemes for effecting an enforced equality of distribution, instead of simply clearing away the obstructions to the freedom of that circulation.

George would certainly agree that limitations on how people can go about trading the fruits of their labor are unjust restrictions of liberty, but when it comes to limitations to one’s sovereignty over land, there can indeed be solid justifications, and both georgists and mutualists recognize the injustice of absentee landlordism. Even Locke was concerned about this when he developed the Lockean Proviso, but George’s solution is far easier to administer.

If one wants to take a deontological position that at the highest meta-political level there exists a natural right to universal usufruct, then so be it, but within that we can cooperatively homestead Georgist communities… and I guarantee they would outcompete any mutualist communities. Though under no circumstance can the recapture of economic rent be put in the same category as taxation which steals from the fruits of labor, nor should it be confused for an advocacy of statism. It is a practical concept that can be administered under any number of political arrangements.

There is a long list of crises that we need to face and I won’t waste time boring you by listing them. As our brightest minds admit they were wrong, I hope that I can say, without qualification, that big changes in our thinking are required. Unfortunately, we haven’t made that “Change” even though we now have some new faces in power, and a bunch of old faces out of business or in prison.

There is still an unquestioned belief in the need for major public transportation projects, global supply chains, large scale social programs, and economies of scale. These have become so integral to our way of life, that they are hardly ever questioned. Granted, Wal-Mart is often used as a public target for venting our frustrations at these things, but virtually all business nowadays is conducted using global supply chains, economies of scale, and so forth.

Thus, our political discourse usually revolves around ways to prop up these very systems, since these are the only ones we know. We believe we require trillions in “infrastructure” funding. We believe that we must “create jobs.” We believe we must become “competitive” in the international marketplace. All of these assumptions are echoed in academia, merely using fancy jargon as a substitute for insight.

Let me first say that I accept the logic of comparative advantage and economies of scale as it applies to the capitalist mode of production, and it can truly be the most “efficient” allocation of resources in a quantitative sense, though not always. Yet, as Peter Drucker once said, there is nothing so useless as doing efficiently that which should not be done at all. I do not accept that the inevitable centralization of power from this sort of production is a good thing. Centralized powers are able to create artificial scarcities, in order to inflate profits at the expense of everyone else. This invariably requires things like corporatism, regulatory capture, secrecy, and rent seeking.

None of these things are very amenable to true progress, which requires openness, peer review, constructive criticism, and creativity. The types of innovations that occur under these centralized systems, even if they take on a bourgeois bohemian quality and aren’t bland and soul-crushing, are incredibly stifling of progress. Open standards are shucked in favor of closed proprietary ones whenever a corporation can get away with it. Parts are never interchangeable. The production processes are so far removed from our daily lives that we have no idea about the processes involved in the creation of the product, and indeed breaking open the gizmo more likely than not voids the warranty… though I’m not sure you’d even want to open it up considering the high density of toxic crap trapped inside.

All of this has had corrosive effects on our culture, as well as our environment. Our hyper-consumerist culture encourages us to get the latest and greatest stuff. We follow a sequence of fads specialized to our exact niche market (hipster, redneck, emo, rock, punk, goth, anime, whatever). We indulge in enormous quantities of unsustainable, non-renewable, and disposable products. Even more discouragingly, many companies use engineered obsolescence to artificially increase output at the expense of the environment.

We are now lamenting the fact that none of us have a clue about what it actually takes to produce tangible, concrete things which improve our lives. We are too busy answering phones, producing ad campaigns, and writing paperwork. Thus, instead of becoming active participants in the production of our culture and economy, or even informed consumers, we have become totally and completely dependent upon forces far beyond our control. As the market swings out of control, so do our jobs, our homes, and our very lives.

Yet, a revolution has occurred right under our noses whose effects have yet to be fully explored, and most of us are completely unaware. Digital communications technologies, especially the Internet, have enabled new modes of production and organization, such as Open Source and P2P, which have never before been possible. If we can learn to harness the power of these systems, we can escape the path our current world is on where each labor-saving device seems only to cause us to work longer hours. Where social programs seem only to foster dependence. Instead of innovating in accordance with the logic of centralized power and artificial scarcity, we can innovate in accordance with human needs and wants.

Open Source Ecology

We can collaboratively build all the necessary life support systems needed, but have it be on a self-contained and local scale. It cannot be known whether the shape this takes will favor truly scale invariant systems, like the hyper-local RepRap project which is allowing production right in your living room, or whether it ends up fostering a new urbanism where production takes place in vertical farms, factories, and community hackerspaces. Talk about vertical integration! It also cannot be known how it will reshape our communities, since each community would be redesigned in a participatory fashion by the members of the community itself. Some may opt for small scale pedestrian-friendly towns in harmony with nature, while others may opt for sustainable urban metropolises, and others may ditch both for self-sufficient mobile homes and yachts.

In each of these cases, the means of production will likely have been placed in the hands of individuals, and drudgery will be automated away much like how open source software projects collaboratively eliminate bugs and expose flaws in wiki articles. Considering all of this, it may be useful to begin talking again about incentivizing local production. “Import substitution,” has long been a naughty word among economists. It is the process of breaking free of foreign dependence by incentivizing local production. Usually via tariffs and other measures. However, this would be a misguided way of going about this.

We don’t need to incentivize local production of just any type. We need to incentivize open and collaborative production. For example, creating prizes for contributing to the Commons. In 2007 there was a proposed bill called the Medical Innovation Prize Act which sought to spur patent-free medical inventions. If only it was this sort of mentality that guided us for the past few decades, then we wouldn’t have ever had such a monstrosity of a healthcare system. The same mentality could guide any industry. A useful exercise would be to think how it could guide the industry you are currently involved in. Finally, the creation of new local credit systems could also incentivize collaborative local production. There are lotsofnewconcepts along these lines.

I also suggest you check out some of my previouswork on decentralization. It is this sort of thinking which is required for a peaceful transition to a new era for our civilization. It will allow us to become resilient to the converging threats which face us from ecological destruction to market failure to terrorism. Global supply chains have shown themselves to be exceedingly vulnerable to these shocks. I hope we can overcome these by localizing production by utilizing global knowledge sharing so we can all enjoy the type of future some of the previous guest bloggers have been talking about.

Nobody is a bigger supporter of energy efficiency than I am. Yet, it is urgent we understand that it is not a solution to our climate crisis.

What is the efficiency paradox?

The proposition was first put forward by William Stanley Jevons in his 1865 book The Coal Question. In it, Jevons observed that England’s consumption of coal soared after James Watt introduced his coal-fired steam engine, which greatly improved the efficiency of Thomas Newcomen’s earlier design. Source: Wikipedia

Why is it that coal consumption soared after the efficiency improved? From an economic perspective, this should be perfectly obvious: as the efficiency of the coal engine increases, it becomes a cheaper option and is thus used at an increased rate.

Europe at Night | Planetary Visions Ltd

The same is true with gasoline engines. The more efficient they become, the more likely it is that people will continue to use them. Even if the entire developed world spent tons of money to convert to electric cars and alternative energy, this would only make gasoline an even more viable option for countries which are still developing.

This summer, Tata Motors is releasing a $2,000 car in India called the Nano. It has taken a century for internal combustion automobiles to mature to a point where they can be produced at such low cost. The internal combustion engine is unhindered by patents and has been mass produced for almost 100 years. New electric engines are unlikely to hit that price point in the foreseeable future, and thus the fastest growing parts of the world are highly unlikely to choose them in an unregulated marketplace.

Energy efficiency will also decrease the price gap between the raising of livestock and the growing of plants. Considering the worst contributor of greenhouse gases is actually the livestock industry, this does not bode well for our planet.

Granted, in certain markets people’s habits do not greatly change as a result of efficiency gains. Hybrid car owners do not drive much more than regular motorists, and people who buy more efficient refrigerators are unlikely to use it more wastefully. Yet, the overall number of these machines purchased would likely increase and still cause any efficiency gains to evaporate.

If climate change is likely to cause significant problems for our civilization in the next century, we cannot expect the free market to correct the problem. If measures are not put in place to improve the competitiveness of carbon-neutral technologies, then drastic measures such as geo-engineering are inevitable.

The risks, moral hazards, and political implications brought forth by geo-engineering are going to be challenging indeed. Considering the overwhelming evidence pointing to humanity’s dangerous impact on the environment, we better prepare for this sooner rather than later. Geo-engineering must move closer to the center of the debate on climate change.

Other longer term options such as space colonization should also be considered. Interestingly, learning to live sustainably is a prerequisite for space colonization. Permaculture, recycling, vertical farming, energy efficiency, and the creation of harmonious ecosystems are key to living in space. NASA has known this for some time now, and it is time we start treating our situation here on Earth with as much foresight. Sustainability is key no matter what course we take.

With this background, I can now state the proposed solution: Reduce the return to holding money below zero. Imagine that the Fed were to announce that, one year from today, it would pick a digit from 0 to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.

This post will be more personal than others on EmbraceUnity – Edward and I have often written in a collective voice, and I want it to be made clear that this in no way reflects the opinions of Edward or EmbraceUnity in general.

In the past few months it has become increasingly clear to me that my dedication to socialism in general and Marxism in particular (historical materialism to be really particular) is unfounded. Furthermore, any sort of compromise position such as social democracy, state capitalism, or corporatism all seem to be misguided as well. The primary focus of my politics has always been personal liberty – a freedom both political and economic in nature. However, I have always felt that political freedom, while important, pales in comparison to economic freedom – if one is economically free it almost naturally follows that one is politically free. From the time I was sixteen until very recently it seemed that the best way to achieve economic freedom was non-violent anarchist socialism.

This idea is so alien to me now that I can barely remember the reasons for why I chose this system. I vaguely recall that I postulated that the only type of economic freedom that matters was relative economic freedom. If one was more free than another, then there really wasn’t true freedom, especially if someone came about their wealth in ways that primarily involved luck – inheritance, for instance.

I now believe I was wrong. Without a central authority (a board of economic planners), socialism cannot work on a large scale, and large scales make possible incredible advances in technology. Anarchist socialism is out when it comes to bettering the human condition. And examples of the failures of planned economies are endless and I have grown tired of making excuses for them. In the end, the USSR was an experiment in socialism that failed for many reasons, but fundamentally there was one deficiency in the system, that being there was no effective way to gauge what and how much was needed to be produced (here I borrow from the Austrian School). There were far too many surpluses and shortages that went on for far too long, which to me is unacceptable for two reasons. First, it is a huge waste of resources and time. Second, and more importantly, it caused a large amount of suffering in people. The free market, on the other (invisible) hand, naturally fixes surpluses and shortages – people still suffer in a free market, it is definitely true, but one would have to be willfully ignorant of the facts to suggest that there is less suffering under a planned economy.

I also dislike state socialism in principle. There is an underlying assumption in it that the economic planners somehow know better what people will need and want than the people themselves. To me, this idea is extremely elitist and classist – the two things that drove me away from capitalism in the first place. Under a free market, people have a mechanism to rebuff the controllers, and that is simply not paying for the good. If a monopoly exists on the good, at least there doesn’t have to be in principle – a different firm could theoretically pop up. Under a planned economy, nothing of the sort exists; people would have to turn to the black market which can subject them to punishment by the controllers. A monopoly under capitalism is better than a monopoly under state socialism. People, then, are more free under a free market, even if there are differing degrees of freedom between the people, at least in theory. Even in theory, under state socialism there is no economic freedom.

But why does this dissuade me from welfare systems or state capitalism? Once you have accepted the free market, you have accepted the idea of the existence of private property. I have often searched for some ontological proof of the existence of private property and have found none. However, I now accept that private property does exist in some form simply because it needs to exist for a free market to exist, which I have decided is better for the welfare of the people than a planned economy. Consider it an utilitarian argument. Private property now in existence, any sort of redistribution of the property via the state is simply theft, which undermines the market. Some thefts need to occur for a market to function – taxes need to be collected for a government to exist in order to punish lawbreakers without bias (after all, if it were up to private businesses to punish lawbreakers they would simply punish people that affected the business the most, which would result in a loss of competition and a loss of what makes free markets extremely beneficial. Anarcho-capitalism is just as foolish as anarcho-socialism). However, when a government decides that a wealthy person “will not miss the money more than a poor person will benefit from it,” the government is stating that it cares not that people, through their individual economic actions, have affectively decided the wealth of every person; that the government knows better than its people. This is no better than the elistism and classism of state socialism and no better than theft from the wealthy.

I will try to stay away from the tired argument that the wealthy are mostly the suppliers of goods and are the most productive citizens, but hey, they are much more productive than the wealthy under state socialism, if only by the virtue that their money has grown by investing in businesses that are productive and are supplying the wants of the people.

I won’t touch on the issue of the Federal Reserve at this time, but I do have much to say about it.

I do, however, still consider myself to be a transhumanist. I feel that the free market is the only way to develop technology – a truly free market devoid of intellectual property laws and trade secrets (more on intellectual property law being a barrier to innovation later). And, when scarcity is abolished, there will be no need of capitalism or socialism – both imperfect systems as they still both lead to great suffering.